Auto warranties are essentially a type of insurance and like any other insurance policy; they use their own special language. The following are some of the terms you need to understand when reading an auto warranty.

Broker vs. administrator – When choosing an auto warranty, you need to know which one you’re dealing with. A broker represents several companies, some of which are more reputable than others. They’re sellers and are usually removed from the administration of the policy. They can give you good savings, but that may be the most expensive money you’ll ever save. An administrator will sell you a policy and oversee the policy after the fact, like a traditional insurance agent. This is what you’re looking for – working with an administrator will be a far better value for your money.

Breakdown vs. wear and tear – These are terms that are used to class repairs. Breakdowns are just that – unexpected and beyond usual, necessary repairs. Wear and tear typically refers to belts, pumps and things that will have to be replaced eventually in the normal course of operation. To get the maximum benefit, only go with policies that cover both.

Reinsurance – This is another insurance company that backs up the initial insurer in case they fold or go out of business. Any company you sign with should have at least one and it should be rated an “A” or better on A.M. Best. This can be looked up fairly easily on the internet.

Transferability – This refers to the ability to transfer the extended warranty if or when you sell the car. It’s best to only buy policies with this option, as they add to the value of your car.

Repair shop – As you might expect, this refers to the place where the actual repair takes place. When buying an auto warranty, you want to be able to pick any shop you want to service your car. Be wary of limitations in this section – the better policies will let you go wherever you want.

Towing service – This is a common benefit that should be included in the policy – if your car breaks down, you won’t want to deal with calling a private towing company yourself. It’s also good to find a policy that provides you with a rental car if the repair will go overnight.

Overheating – Overheating is damage to your car that occurs when a part gets too hot. Some policies won’t cover overheating of any kind, so be sure this isn’t in your policy.

Money Back Guarantee – This should be exactly what it sounds like. Some companies will play with the definition, so if it sounds hard or difficult to access, go to another company.

Claim procedure – These are the policies and procedures you need to follow in order to get your mechanic paid. The simpler they are, the better – avoid companies who make these unusually difficult.

Deductible – This is the amount of money you’ll have to pay before the policy goes into effect. Some policies have them, others don’t. In either case, you should be well aware of them before you sign any policy. In some cases, they may also be known as out of pocket expenses.

Reimbursement – There are policies that require you to pay for the repairs up front and then file with the company to get your money back. This may allow you to get a cheaper policy, but be aware that it’s another level of hassle that you’ll have to deal with.